The contract is signed and estimating never read it
The scope in the contract differs from the scope that was bid, and the person who built the number finds out after the job starts.
After the PM marks up the contract, a copy goes to estimating, the superintendent and business development to redline. Then the PM holds an internal meeting to confirm the scope that was bid is the scope in the contract. Three people read every contract: one for what happens if it goes legal, in arbitration or court, one for scope and one for business impact, such as the payment terms. That reading happens at the same time as the redlines and the scope meeting, before the markups go out. The PM puts the markups together, negotiates and coordinates between the two companies, and the person with signing authority executes it.
Three moves, in order
Step 06: Project management
Billing dates, change orders, and notices, written as standards that work without anyone following up on them.
Learn this part of the job
SPM The Construction CFO publishes this course. It's a separate company from this one, and the course is on its own school site.
Other problems step 06 solves
Other things that go wrong
What owners ask
Should the estimator review the construction contract before signing?
The scope in the contract differs from the scope that was bid, and the person who built the number finds out after the job starts. After the PM marks up the contract, a copy goes to estimating, the superintendent and business development to redline. Then the PM holds an internal meeting to confirm the scope that was bid is the scope in the contract. Three people read every contract: one for what happens if it goes legal, in arbitration or court, one for scope and one for business impact, such as the payment terms. That reading happens at the same time as the redlines and the scope meeting, before the markups go out. The PM puts the markups together, negotiates and coordinates between the two companies, and the person with signing authority executes it.
Which part of the system fixes this?
The step is number 06, project management. Billing dates, change orders, and notices, written as standards that work without anyone following up on them. It's drawn from chapter 6 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% after taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Send the PM's marked up contract to estimating, the superintendent and business development to redline.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 06 depends on step 04, estimating system. Install it ahead of that and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.